Congratulation on your decision on hiring an employee(s). Like many, we all learnt the hard way, this article is highlighting a few shocking truths about hiring mistakes
When you’re a business owner, hiring a new employee might be one of the biggest and scariest decisions you have to make. Before you take on someone new, it’s important not to make the following mistakes:
- Additional Cost – Employers PRSI
- Agreeing to net wages
A. Employers PRSI
When hiring an employee, you need to note that when you agree a salary, there is an added cost of Employers PRSI of between 8.6% – 10.85% depending on the Gross pay that week/month. The examples below show that the additional cost can be up to 10.85% more than the Gross salary you agreed with the new employee.
There is an unspoken rule that you must have at least 3 months’ salary saved before hiring an employee, as it could take this time before they start earning for the business.
Example B. Agree Gross Wages/Salaries
Never, ever agree NET WAGES with an employee. The potential consequences could cost you your business. This is a common occurrence and we have had to work with clients to rectify situations like this. The overall cost could be double the net wages you agreed with the employee.
By agreeing net wages, you do not know if the employee is married and jointly assessed for taxation purposes, they can transfer their personal tax credit of 1650 and up to 9000 euro of their rate band to their spouse. The employees PAYE credit and remaining rate band are non-transferable. This can be done by married couples at any time with Revenue.
When hiring employees, we advise you to discuss with the payroll provider prior to hiring. One of the most important investments is in new employees. It’s very important to bear in mind the actual, final cost to your business when hiring an employee rather than just the salary you are offering. We hope the mistakes outlined above will help you make better decisions. If you have any questions, drop us a quick email on firstname.lastname@example.org.